Nearly 1 in 4 Americans say they have changed or left a job because of the length of their commute. For employers, the benefits of promoting a commuter-friendly workplace are essential. Costs are saved when you reduce employee turnover, and production increases with morale as employees are less stressed from their commute. Companies that are dedicated to reducing traffic congestion and pollution not only improve air quality for all—it also has a positive effect on their public image.
Parking cash out is a program that allows employees to opt out of having a parking space and instead receive compensation from their employer who leases or owns the space. This encourages employees to use other commute solutions which decreases traffic congestion and improves air quality for all.
Parking cash out develops its own incentive…cash! But remember, most people who give up their parking space will need to find another way to work, so the employers should explore the incentives that support other Commute Solutions strategies. And since the employee is likely giving up car commuting entirely, three incentives are particularly helpful:
- Offering a Guaranteed Ride Home program
- Allowing them to use employer fleet or pool vehicles for meetings, personal use, etc., during the day
- Keeping extra open spaces and allowing the employee to “check-out” a parking space if needed
Reduce Parking Needs
Employee Income Increase
Increase Community Connectivity
Improve Air Quality
Exercise & Health
Commuter Tax Benefits
Employers and employees are both eligible to receive tax benefits to use a portion of their pre-tax income for public transportation and parking according to the IRS Revenue Procedure 2018-57.
Monthly spending on mass-transit services, van pooling services, and parking either at work or at a Park & Ride lot are tax exempt for employees.
Employers may also offer a salary deferral program that employees can use to pay their transit and parking costs.
Frequently Asked Questions
Tools & Resources
Qualified Transportation Fringe Benefits
|Category||Transit||Commuter Highway Vehicle (e.g., vanpool)||Qualified Parking||Qualified Bicycle Commuting Reimbursement|
|Incentive Levels||Up to $265/month* for transit expenses||Up to $265/month* for commute trip in a vehicle with a seating capacity of at least six adults (excluding the driver), with at least 80 percent of the vehicle’s mileage for a year is reasonably expected to be for commuting and on trips during which the number of employees transported for commuting is at least one-half of the seating capacity of the vehicle (excluding the driver)||Up to $265/month** for parking at or near an employer’s worksite, or at a facility from which employee commutes via transit, vanpool, or carpool||Qualified Bicycle Commuting Benefit remains ineligible as a tax free benefit.|
|Employer||Employers may give their employees up to $265/month for transit vouchers, commuter highway vehicle fares and/or commuter parking fees.|
Change in 2019: Private sector employers are no longer able to deduct the tax-free qualified transportation fringe benefit payments to employees as a business expense. Only if an employer treats the qualified transportation fringe benefits as taxable W-2 wages to the employee, the employer can deduct the expenses of providing those benefits.
|Qualified Bicycle Commuting Benefit remains ineligible as a tax free benefit.|
|Employers may allow employees to use up to $265 per month in pre-tax income to pay for transit vouchers, commuter highway vehicle fares and/or parking fees.|
Employers may reduce their payroll tax contribution of the pre-tax income used by employees to pay for transit vouchers, commuter highway vehicle fares and/or parking fees.
|Employee||Most employees may receive up to $265/month for purchase of transit vouchers, commuter highway vehicle fares and/or parking fees from his or her employer. This subsidy value will not appear on their W-2 form as income.||Qualified Bicycle Commuting Benefit remains ineligible as a tax free benefit.|
|Employee pays for commute benefit with the pre-tax income up to the $265/month statutory limit and receives more after-tax spendable income.|
|Employee may combine the pre-tax benefit with employer subsidies up to $265/month for each to pay for transit vouchers, commuter highway vehicle fares and/or parking fees.|
* tax free transit and vanpool benefit limit increased from $260 per month in 2018. It was raised to $265 per month for beginning January 1, 2019.
** tax free parking benefit limit increases from $260 per month in 2018 to $265 per month beginning January 1, 2019.
Visit the Best Workplaces for Commuters website and read the FAQs on Qualified Transportation Fringe Benefits for information on types of qualified commuter benefits, tax savings for employers and employees, tax benefits of employee pre-tax deductions, and more.
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